A new PwC survey identifies the barriers to blockchain adoption, and how companies can overcome them.

1. strategy+business
ISSUE 93 OCTOBER 11, 2018
Why Is It So Hard to
Trust a Blockchain?
A new PwC survey identifies the barriers to blockchain adoption
and four strategies to overcome them.
BY STEVE DAVIES AND GRAINNE MCNAMARA

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Steve Davies
steve.t.davies@pwc.com
is a partner with PwC UK, based in
Edinburgh. He is PwC’s blockchain
leader for the firm’s global
network, working with clients on
blockchain-related initiatives and
business strategies in financial
services, supply chain provenance,
smart contract applications
across various industries, and
blockchain security.
Grainne McNamara
grainne.mcnamara@pwc.com
is a principal with PwC US, based
in New York. She is the PwC US
blockchain and cryptocurrency
leader, specializing in delivering
large transformation programs at
top-tier banks.
The rate of adoption for an emerging technology is influenced by how well it is
understood and trusted. Potential adopters may feel anxious, or at least skep-
tical, about embracing a wholly new system — in particular, one that requires
companies to rethink traditional ways of managing and sharing their data. This
is perhaps especially true for blockchain, a technology whose very purpose is to
fill gaps in confidence.
Let’s dissect that paradox. Blockchain technology, by creating an immutable
record of data transactions, should engender trust among its users. But survey
data from a new global study by PwC reveals that trust issues are threaten-
ing to impede companies’ blockchain efforts at nearly every turn. This is not
to say that companies aren’t experimenting: 84 percent of our survey respon-
dents — representing a cross section of technology-focused leaders in 15 territo-
ries around the world — report at least some involvement with blockchain. To
make the most of their initiatives, they’ll need to tackle their trust issues
head-on.
As with any emerging technology, there are challenges and doubts about
blockchain’s reliability, speed, security, and scalability. Such doubts are only
compounded by concerns regarding a lack of standardization and interopera-
bility across blockchain systems. Moreover, many executives remain uncertain
about what blockchain is and how it will change their business. Blockchain’s role
as a dual-pronged change agent — as a new form of infrastructure and as a new
way to digitize assets through tokens, including cryptocurrency — is not easy
to explain.

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Another challenge is building trust among participants: A technology meant
to bring consensus hits an early stumbling block on the need to design rules and
standards. There’s a similar lack of comfort regarding regulation. The majority
of regulators are still coming to terms with blockchain. Many territories have
begun studying and discussing the issues, particularly as they relate to financial
services, but the overall regulatory environment remains unsettled.
What’s a company to do? Clearly, blockchain has arrived. And those that
adopt a wait-and-see mind-set risk falling behind the competition. But as our
findings make clear, leaders should not swing to the opposite extreme by jump-
ing in unprepared. Of the survey respondents who reported a blockchain project
in the pilot stage, 54 percent said the effort sometimes or often hasn’t been justi-
fied by the result. This should be a call to more effective action. By focusing on
four key strategies early in their blockchain efforts, companies can build trust
and set themselves on a path to successful execution.
1. Make the business case. Developing and implementing a blockchain is not
your traditional IT build. There’s no point in re-creating the old world, but with
a blockchain at its core. The danger in not recognizing this paradigm shift from
the outset is that companies will end up reasserting existing roles, processes, and
business models. What they need is a commitment to a strategy that is suitably
transformed from where they are today. And that begins with the business case.
Start with a few questions: What are we trying to achieve strategically? What are
the pain points, and which other stakeholders share them? How would we fund
such an initiative? How might it be governed?
Blockchain Is Here. What’s Your Next Move?
PwC’s inaugural global survey of 600 executives from 15 territories
reveals the state of blockchain today.
www.pwc.com/blockchainsurvey

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2. Build an industry ecosystem. Convening a group of stakeholders to agree
collectively on a set of standards that will define the business model is perhaps
the biggest challenge in blockchain: Forty-four percent of survey respondents
reported that the inability to bring the network together was a top barrier to
adoption. Participants have to decide the rules for participation, how to ensure
that costs and benefits are allocated fairly, what risk and control framework can
be used to address the shared architecture, and what governance mechanisms
are in place, including continuous auditing and validation, to make certain that
the blockchain functions as designed.
3. Determine the rules of engagement. The participants in a blockchain eco-
system need to decide what the operating standards will be and what various
users will be able to see and do. The design begins with the strategic business
model, which includes making decisions about whether the blockchain will be
permissionless, and thus available to everyone, or permissioned (having various
levels of permissions). Permissions determine participants’ roles and engagement
with the blockchain, which can range from entering information or transactions
to only viewing information. The choice of model isn’t automatic; organizations
will decide based on design and use case con-siderations. They will also need to
consider the type of network to establish. Forty percent of survey respondents
reported that they were using permissioned blockchains, 34 percent were work-
ing with permissionless chains, and 26 percent were taking a hybrid approach
(meaning the project they are working on uses a mix of permissioned and per-
missionless blockchains).
44 percent of survey respondents
reported that the inability to bring the
network together was a top barrier to
blockchain adoption.

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4. Navigate regulatory uncertainty. A well-de-
signed blockchain validates data and eliminates
the need for a central authority, such as a bank,
clearinghouse, or government, to approve and
process transactions. Cutting out that central au-
thority may reduce costs and delays, but it also
removes the institutions that are important for
ensuring market stability, combating fraud, and
more. There are indications that regulators will
eventually step in when it comes to blockchain,
but that shouldn’t be a reason to slow progress.
Yet among survey respondents, 27 percent believe that regulatory concerns are
the number one barrier to blockchain adoption. This uncertainty is fairly consis-
tent around the world, with the number of respondents who ranked regulatory
concerns as their biggest barrier ranging from 17 percent in China to 38 percent
in Germany.
As a distributed, tamperproof ledger, a well-designed blockchain doesn’t just
cut out intermediaries, reduce costs, and increase speed and reach. It also offers
greater transparency and traceability for many business processes. Most compa-
nies will confront a variety of challenges as they seek to reap the rewards of this
potential. Building trust — in the technology, in their strategy, in their network,
and in the regulatory environment — is a critical first step. +
Source: PwC Global Blockchain Survey, 2018
How Far Along Are Companies
with Blockchain?
Survey respondents described the current state
of their company’s blockchain project.
research
development
pilot
live
paused
no activity yet
20%
32%
10%
15%
7%
14%

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